U.S. edible oils processors increased consumption of refined palm and palm kernel oils starting in June 2020, around the time that use of soybean oil for biofuels shot up. Between June 2020 and June 2021, processors removed 3.0 billion pounds of refined palm oil from stocks, up 18 percent from the same period a year earlier. For PKO, processors removed 665.8 million pounds, more than double the year-ago volume.

More processors are turning to PKO in preference to coconut oil: In early 2020, coconut oil pricing pulled notably higher as availability of PKO grew, leading to increased substitution of compatible PKO. From June 2020 to June 2021, processors removed 739.8 million pounds of refined coconut oil from stocks, down 17 percent year on year.

The combined volume of tropical oil consumption has remained over 300 million pounds per month since June 2020, a record processing pace.

Imports of refined palm and palm kernel oils have not really kept pace with the increase in consumption, however—at least, not in volumes to keep stocks at what used to be considered average. For palm oil, we used to see monthly stocks close to 400 million pounds, or about twice the volume removed each month for processing. In 2018, stocks averaged around 300 million pounds per month; stocks seemed to be on track to higher volumes through early 2020, until supply problems hit the industry during the pandemic. Now, we are seeing monthly stocks just about 20 to 60 million pounds more than demand, creating a tough market.

For PKO, we have seen a similar contraction in stocks, to the extent that during three months in 2021, demand for processing was greater than the month’s ending stocks level. While we are used to seeing higher stores of palm oil and PKO, for many years the coconut oil market has contended with monthly use exceeding stocks volumes. It may be that PKO is headed toward a similar dynamic, and palm oil users will have to learn to negotiate a tighter S&D situation.

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Tropical oils removed from stocks for processing

Source USDA

U.S. imports of refined tropical oils

Source: USITC
Posted by: Information Services
Our Information Services team assists our clients with understanding commodity and ingredient market dynamics. Using our extensive database of intelligence, we also produce regular commodity and commercial market publications covering supply and demand fundamentals, news alerts on events that shape the markets, and resource guides to give you a complete picture of the industries we monitor.